Question

At a fraternity party, Gabe mentions that he is going to learn to parasail during spring break. Valerie, a casual friend, overhears him, and the next day she purchases a $200,000 life insurance policy on Gabe’s life. Gabe has a happy week of parasailing. But on the way home, he is bitten by an exotic bird and dies of a rare tropic disease. Valerie files a claim for $200,000. The insurance company refuses to pay. If Valerie sues the insurance company, what will be the outcome of the case? Explain your answer.

Now assume that Valerie has loaned Gabe $100,000. Gabe again mentions that he is going to learn to parasail during spring break, so Valerie purchases the $200,000 life insurance policy on Gabe’s life. If Gabe dies and the insurance company refuses to pay and Valerie sues, what will be the outcome of her case? Explain your answer.

John hires Vernon to add an electrical outlet to his living room for his new HDTV. Vernon does an excellent job, and the new outlet works perfectly. Vernon presents John with a bill for $300. But Vernon is not a licensed electrician. Their state sets licensing standards in the profession to protect the public. And so, John can refuse to pay Vernon’s bill. Is this reasonable? She he be able to avoid payment? Why or why not? Explain.

Ann sold her retail dress shop in Boston to Haleigh, agreeing not to engage in a similar business within five blocks of the present location for one year. Is Ann bound by the agreement? Explain your answer.

Answer 1

Part 1:

The outcome of the case depends on the clauses in the policy agreement. If the life insurance has a policy that the claim is effective only after a certain period of payment of first installment and the the death has occurred before that, then claim can not be processed and court will rule in favor of insurance company. Also if there are clauses that for certain deaths claim can not be made, and this death falls within the defined list even then the insurance company may not pay the claims.

In every other case the outcome of the case will be ruled in favor of Valerie.

Part 2:

In this case Valerie has loaned Gabe $100,000. The loan is of no significance here. The outcome of the case will be the same as explained above.

Part 3:

If John refuses to pay that would not be reasonable. Also John cannot refuse to pay Vernon because if John knew Vernon is not a licensed electrician he should not have asked Vernon to do the work in the first place. Once the work is completed he cannot refuse to pay since that would be a breach of contract.

Part 4:

If there has not been any written agreement, Ann is not bound by the agreement. Although she might be wrong ethically if she sets up a shop close by, but she is not bound by any agreement.